Reforms necessary to make India self-reliant

For the first time in six decades, the entire world has been so adversely affected by a virus, to the extent that economies across the world were forced to come to a standstill in order to contain the spread of this deadly disease. With global economic activity being at an all-time low and countries imposing nationwide lockdowns around the globe, it was imperative for governments to devise bailout packages for their countries and citizens.

Amongst all the relief packages announced in the world, Germany was one of the fastest countries to have sketched its road map to bolster its economy through this unprecedented crisis. The government announced an economic stabilisation package of €600 billion. It then went a step further and allocated up to €15,000 to small businesses to sustain them during the lockdown. Like Germany and other advanced economies, India too falls among the leading economies of the world. The government took its own slew of measures; it announced the ₹20 lakh crore economic package to be disbursed across sectors that were drastically affected during the pandemic.

Since the adoption of the Constitution, there have been several amendments to the laws and regulations. These amendments and reforms are necessary to replace old and archaic laws and equip the sector with the contemporary world. This has often resulted in reinvigorated production and efficiency in business and tax collections.

With the developments happening around the India-China relationship, sentiment is building against Chinese-made products. This will have an impact on Indian businesses working with Chinese brands, which will give an additional push to vocal for local. In such a scenario, reforms are critical and a significant push from the government will ease the environment to attract business to set up manufacturing hubs in the country and ease our reliance on imports from other countries, encouraging India to move on the path of being atmanirbhar (self-reliant).

While India has jumped several spots in the Ease of Doing Business rankings recently, there are still some measures that need to be taken to make it the most-preferred investment horizon in Asia. With numerous companies now looking to re-shore their manufacturing units from China to other destinations, this is a lucrative opportunity for India to augment its ‘Make in India’ vision; but it will have to make bold structural reforms to boost transparency, thereby enhancing India’s manufacturing capabilities.

Prior efforts have resulted in huge investments from MNCs setting up manufacturing bases and offices across states with higher transparency. This will also favour us in attracting foreign investment and improving the employment ratio. The government should also formulate ways to ease norms in warehousing and regulate wholesale markets to improve the supply chain.

Despite having declared a nationwide lockdown, the Government of India ensured the sale and supply of essentials through retailers, wholesalers, and kirana stores. The retail industry accounts for 10% of the GDP of India. Additionally, it is responsible for 8% of employment generation in the country. In India, there are approximately 12 million kirana stores that range from large stores in cities to tiny shops in the village, servicing a few hundred people. Kirana stores are conventional businesses, and their advantage is that they understand the pulse and pain of their consumers and are well versed in the trade of food and groceries. According to a report by India Brand Equity Foundation (IBEF), India is currently the world’s fifth-largest global destination in the retail space.

Real Estate plays a primary role in the infrastructure of the country and is also a leading employment generator. Retail makes up a significant portion of commercial real estate; however, 90% of the retail sector still falls under the unorganised category. Despite both state and central governments taking measures, more efforts need to be channelled to organise the sector.

The dilution of the APMC Act will benefit the farmers and further encourage new reforms in the agricultural sector. This was a bold move by the government to connect the farmers directly to the buyers, who could be merchants or even large food processing companies. This will indirectly create additional jobs that will result in an increased demand of goods, thereby leading to the prosperity of the farmer.

To stimulate demand that is currently subdued, the government will have to work on relief measures to encourage discretionary spending. The only way to improve the situation is by creating extra liquidity to propagate demand. Cues from Germany suggest that certain tax rebates and holidays could lift the buyer’s sentiment. For example, despite being considered as essential goods, soaps, toiletries, biscuits, and packaged food fall in the 18% tax slab. The government should not only consider bringing down the tax rate for such items to 12% but should also work on ways they can reduce the number of tax slabs that are present in the current GST regime.

With the easing of the lockdown restrictions and the resumption of several businesses, it is now time for serious reforms that will make the country self-reliant, especially in areas that need serious intervention, such as manufacturing, retail, and agricultural and technological reforms.

There is indeed a long way to the full recovery for India and the only imperative now is to overhaul archaic policies. However, technology is catalysing the way these reforms are shaping up. Even during the lockdown, technology played a significant role in ensuring the continuity of business and encouraging offline retailers to adapt to stay relevant. It is also important to note that in the future, technology will play the role of an ‘enabler’ for many reforms, especially for various sectors dependent on the retail industry. Measures undertaken in these sectors will create a conducive atmosphere for new investments, which in turn will play a key role in kick-starting the economy of an Atmanirbhar Bharat that will propel us through this turbulent phase.

Views are personal. The author is MD and CEO, METRO Cash & Carry India.